Social Security is fully funded by those of us who will depend on it. It does not take taxes from the wealthy. That's why there is a maximum income on which the FICA tax applies, and the FICA tax does not apply to investment income.
Social Security retirement is fully funded by the FICA tax. It has never paid out in more in any year than it took in. If it ever reaches the point where the revenue from FICA plus the reserve in the trust fund already paid by FICA cannot cover the benefits for the coming year, by law dating back to 1935 the benefits for that year will be reduced to the level which the revenu can pay for. In the worst possible case that will not happen for half a century and is unlikely then. The very worst and most unreasonable possible projection states that benefits will be paid at 75% of the promised value.
Social Security retirement does not and cannot contribute to the deficit! So this whole damned Simpson/Bowles (and Pete Peterson) proposal is a rich man's plan to soak the workers to pay for their tax cuts and unnecessary unfunded wars. This is nothing more than theft by the oligarchs!
So the question arises - why is everyone spreading lies and fear about Social Security? It really started seriously in 1983 under Ronald Reagan - an avowed enemy of both Social Security and of Medicare. Here is a description of the problem by William Greider entitled "The Looting of Social Security.
To understand the mechanics of this attempted swindle, you have to roll back twenty-five years, to the time the game of bait and switch began, under Ronald Reagan. The Gipper's great legislative victory in 1981--enacting massive tax cuts for corporations and upper-income ranks--launched the era of swollen federal budget deficits. But their economic impact was offset by the huge tax increase that Congress imposed on working people in 1983: the payroll tax rate supporting Social Security--the weekly FICA deduction--was raised substantially, supposedly to create a nest egg for when the baby boom generation reached retirement age. A blue-ribbon commission chaired by Alan Greenspan worked out the terms, then both parties signed on. Since there was no partisan fight, the press portrayed the massive tax increase as a noncontroversial "good government" reform.In other words, the Social Security tax (FICA) was increased to build up trust funds that would allow payment of full promised benefits to the baby boomers when they retired. That was promised thirty years ago when Reagan and the conservative movement needed the votes of the new young conservatives and so they did not want to threaten their promised retirement. But that was then. This is now.
Ever since, working Americans have paid higher taxes on their labor wages--12.4 percent, split between employees and employers. As a result, the Social Security system has accumulated a vast surplus--now around $2.5 trillion and growing. This is the money pot the establishment wants to grab, claiming the government can no longer afford to keep the promise it made to workers twenty-five years ago.
Actually, the government has already spent their money. Every year the Treasury has borrowed the surplus revenue collected by Social Security and spent the money on other purposes--whatever presidents and Congress decide, including more tax cuts for monied interests. The Social Security surplus thus makes the federal deficits seem smaller than they are--around $200 billion a year smaller. Each time the government dipped into the Social Security trust fund this way, it issued a legal obligation to pay back the money with interest whenever Social Security needed it to pay benefits.
That moment of reckoning is approaching. Uncle Sam owes these trillions to Social Security retirees and has to pay it back or look like just another deadbeat. That risk is the only "crisis" facing Social Security. It is the real reason powerful interests are so anxious to cut benefits. Social Security is not broke--not even close. It can sustain its obligations for roughly forty years, according to the Congressional Budget Office, even if nothing is changed. Even reports by the system's conservative trustees say it has no problem until 2041 (that report is signed by former Treasury Secretary Henry Paulson, the guy who bailed out the bankers). During the coming decade, however, the system will need to start drawing on its reserve surpluses to pay for benefits as boomers retire in greater numbers.
But if the government cuts the benefits first, it can push off repayment far into the future, and possibly forever. Otherwise, government has to borrow the money by selling government bonds or extend the Social Security tax to cover incomes above the current $107,000 ceiling.
The money has built up as promised, and in line with the philosophy of the Social Security System the surplus was invested in the most secure investment in the world - U.S.Treasury bonds. Think about this last two years. Would you have wanted your retirement fund invested in Wall Street? Social Security was not invested there and we should all be thankful because you cannot trust a Wall Street bank.
Investing the surplus money was an investment decision, and it was based on the history of the federal bonds. Investors who lend money to borrowers do not have the power to determine what that money is used for.
Bill Clinton in the 1990's using a few tweaks and tricks, eliminated the annual government deficit and turned it into a surplus. George Bush hated that. He claimed the annual surplus was the taxpayers money, so he rammed through the 2001 tax cuts for the wealthy. But much of that surplus was the overtaxing of workers to fund the Social Security system when the baby boomers retired. The money was paid in by the workers, but the conservatives gave the tax cuts to the wealthy investors.
The taxes were on the workers who created value and the revenue from those taxes was given to the parasitic wealthy investors. The promptly invested the money in China and Indonesia and such because that is where they got greater returns easier. As a result the workers were funding the very jobs overseas that the American wealthy investors were closing down here in America.
But the tax cuts for the wealthy parasites was only the beginning. Bush lied to Americans about 9/11 and invaded Iraq for no rational reason. The cost of that war and the improperly run war in Afghanistan have run a $ trillion a year since then. The money to pay all that profligate and immoral spending came from overseas bond investors (China especially) and from the Social Security trust fund.) Still OK financially as long as the Social Security trust fund was receiving surplus money.
Only now the baby boomers are starting to retire in greater numbers and the surpluses that the Social Security trust fund are about peaked out. The Social Security program is going to start drawing down the trust funds. More important, the federal government is going to have to start paying back the money it has borrowed to finance the improvident conservatives.
The Republican Party needs to change it's mascot from an elephant to a grasshopper. They are the ones who went all summer and refused to save for the winter.
So to keep the sterling safety rating for U.S. treasury bonds the federal government will have to start paying back those they borrowed from. China, other foreign countries, and (gak) the Social Security trust fund. The government will have to raise taxes to pay for the money it has already wasted on tax cuts to the wealthy and idiotic unwinnable discretionary wars.
Only the government can lower social security benefits instead of paying back the trust fund.
Since the middle class is taxed out, raising taxes on the middle class directly is a non-starter. So the taxes to pay the federal debts are going to have to come from the wealthy parasites of the investor class. But to the extent the conservatives can loot social security and leave the future retirees in penury, that is taxes the Congress will not have to levy on their wealthy supporters and lobbyists.
That's what this Simpson/Bowles catfood commission leak is all about. It's an indirect way of looting Social Security and taxing the working class to support the wealthy parasites who seem to own Congress. The parasites, of course, desperately need the money to fund their next extravagant mansions as they compete with each other in conspicuous consumption.